Supplying Services or Goods and Services to Consumers? You Must Read This! New Mandatory Requirements for Warranties against Service Defects

March 4, 2019

New requirements

Recent amendments to the Competition and Consumer Regulations 2010(Cth)now require businesses to include the prescribed form and content of warranty when providing a warranty against defects for the supply of services. This includes circumstances where goods and services are provided in unison. The changes commence operation on 8 June 2019. Previously, mandatory wording was only required for warranties against defects for the supply of goods. Warning: civiland criminal penalties apply if you do not comply.

Warranties against Defects

The Australian Consumer Law (“ACL”) regulates warranties against defects only in circumstances where the warranty is given to a consumer in connection with the supply of goods and/or services. One does not qualify as a consumer if the goods and/or services are obtained for the purpose of re-supply, repair and/or transformation in the process of manufacturing or production.

The criterion of a “consumer” is as follows:

1. The goods or services are valued at or below $40,000; or

2. The goods or services are the sort ordinarily acquired for personal, domestic or household consumption or use; or

3. The goods are a vehicle or trailer used mainly for the transport of goods on public roads.

Warranties are usually supplied free of charge and are often referred to as a ‘manufacturer’s warranty’. They are commonly documented on packaging or paperwork accompanying a product or service. Warranties against defects are representations made to a consumer, at or around the time that goods and/or services are supplied, such that if the goods and/or services are defective, the business will repair or replace the goods (or part of them), re-supply or fix a problem with the services (or part of them) and provide compensation to the consumer.

A reminder about existing requirements

It remains an offence under the ACL to provide a warranty against defects that does not comply with the requirements outlined in the ACL. Although the mandatory wording for services warranties is a new requirement, the following law remains unchanged:

i. a warranty against defects must be provided in a document that is transparent;

ii. a warranty against defects must concisely state:

a. what the person who gives the warranty must do so that the warranty may be honoured; and

b. what the consumer must do to entitle the consumer to claim the warranty.

iii. a warranty against defects must prominently state the following information about the person who gives the warranty:

a. the person’s name;

b. the person’s business address;

c. the person’s telephone number;

d. the person’s email address (if any).

iv. a warranty against defects must state the period or periods within which a defect in the goods or services to which the warranty relates must appear if the consumer is to be entitled to claim the warranty;

v. a warranty against defects must set out the procedure for the consumer to claim the warranty including the address to which a claim may be sent;

vi. a warranty against defects must state who will bear the expense of claiming the warranty and if the expense is to be borne by the person who gives the warranty – how the consumer can claim expenses incurred in making the claim; and

vii. a warranty against defects must state that the benefits to the consumer given by the warranty are in addition to other rights and remedies of the consumer under a law in relation to the goods or services to which the warranty relates.

The new mandatory wording for giving a warranty against defects in relation to a supply of only services must include the following:

Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

· to cancel your service contract with us; and

· to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to be compensated for any other reasonably foreseeable loss or damage. If the failure does not amount to a major failure you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract.

The new mandatory wording for giving a warranty against defects in relation to a supply of goods and services must include the following:

Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

· to cancel your service contract with us; and

· to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to choose a refund or replacement for major failures with goods. If a failure with the goods or a service does not amount to a major failure, you are entitled to have the failure rectified in a reasonable time. If this is not done you are entitled to a refund for the goods and to cancel the contract for the service and obtain a refund of any unused portion. You are also entitled to be compensated for any other reasonably foreseeable loss or damage from a failure in the goods or service.

Exceptions

Exceptions exist for services supplied under a contract of insurance; the supply of gas, electricity or telecommunications; and a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored.

If you, your business or the company in which you work are currently providing consumers with a warranty against defects in connection with the supply of goods and/or services, ensure that your warranty documentation is updated with the prescribed wording before 8 June 2019. Since civil and criminal penalties apply from 8 June 2019, now is the time to make the transition.

Gavin Parsons and Associates can assist you with any questions you have regarding the Australian Consumer Law. Please contact us today on (02) 9262 4471.